US$ shaping much of the market action

Last week: Last week was pretty much defined by the stronger US$. The key 100 level isn’t that far away now and so the index may attempt a run at this major S/R level in coming sessions. If so, catching some of that move may be the trade to stalk next week.

I have one more week to go with the trial of my algorithm during the European and US trading sessions. It probably hasn’t been the best period for such a trial given the market deliberations around Brexit and the US Presidential Election but I have accumulated sufficient data to make enough of an evaluation. The first point to note with my trial is that there has been a greater frequency of signals using this smaller time frame. The tally below is rather crude but gives an overall view of the performance. The success rate for the algorithm off 30 min chart trading after week 3 is 40/59 or roughly 67%:

TC Signal results to end of week 3:

Week

No of signals

Result: Gain of 20-100 pips

Result = Loss (generally 20-50 pips)

Result = Flat

1

10

8

2

0

2

21

14

1

6

3

28

18

7

3

Total

59

40

10

9

Next week:

US$: the index has closed higher for the week and a review of the FX indices can be found through this link.

US Earnings: continues next week with some big names reporting including Visa, Caterpillar, Procter & Gamble, Coca-Cola, Amazon, Google, Tesla and Twitter to name just some. The results of these earnings can greatly impact broad-based market sentiment, with flows through to FX as well, and so should be monitored.

USD/CAD: this pair had been range-bound in a wedge for the last 24 weeks but closed the week testing the upper trend line of this wedge. This pair is one to watch for any makeor breakactivity; especially if the US$ keeps trending higher.

EUR/GBP: this pair has piqued my interest again given the bearish-reversal weekly pattern and weekly close below 0.89. This pair could be consolidating before its next major move and is well worth watching.

Gold: had a bullish week despite the stronger US$ and the weekly hold above $1,265 is also bullish. I’m on the lookout for any continuation with this and other commodities. I note the increased price of coal is making headlines too. The Gold miners ETF, GDX, has printed a bullish-reversal ‘Morning Star’ style of pattern and any new close and hold above $25 would be rather bullish. Failure at $25 though might help to carve out a bearish H&S:

The S&P500, DJIA, NASDAQ, DAX, FTSE and Russell 2000 all printed small bullish coloured candles but the TSX printed a large bullish candle following the weaker CAD$. The FTSE continues to hold above the 7,000 level and I’m on the lookout for any monthly close above this 7,000 level to support an ascending triangle breakout akin to those seen on the S&P500, DJIA and, more recently, the NASDAQ.

I continue to watch out for further clues as to any new momentum move, long or short though! In particular I’m looking out for:

S&P500 daily chart: The index is trading within a triangle but is holding above the monthly chart’s 2,135 breakout level.

S&P500 monthly: The current monthly candle is still bearish coloured but it is worth noting that the bearish divergence has faded.

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and continues to hold above the Flag supporting a bullish breakout. Last week’s candle was a small bullish ‘Inside’ candle but still below the key 1,220 S/R level so keep an eye on the monthly support trend line.

VIX Index: The ‘Fear’ index printed a large bearish candle and is now back below the 14 threshold level.

Copper Weekly: a bearish candle but still holding above the ‘2’ handle as it continues to coil within a triangle. I remain on the lookout for any breakout.

Junk Bonds: this printed a bullish weekly candle and I’m still watching for any momentum-based triangle breakout here.

Oil: Oil continues holding above the 2009 low of $33.50 and printed a bullish weekly candle. We have now had two bullish weekly candles close above the $50 threshold so watch for any continuation with the bullish-reversal Inverse H&S pattern as the target for this move is up near $70.

USO weekly: the triangle pattern on the Oil ETF, USO, is worth watching for any potential breakout.

FOREX:

EUR/USD: The E/U chopped lower last week and has again closed below the 1.10 S/R level.

The weekly chart shows that the EUR/USD has been consolidating in a horizontal range bound by the 1.15 and 1.045 levels for the last 20 months. Thus, the hold below 1.10 still has me looking to lower levels as targets and these are some that I’ll be watching; apart from the obvious whole-number levels:

The first target was the 61.8% fib of this latest swing high move, near the 1.095 region, but this has now been broken.

The second target is the 78.6% fib of this move near 1.075.

The next target is be the 1.045 level which is the 2015 low.

Price is trading below the 4hr and daily Cloud.

The weekly candle closed as a bearish candle.

There is some EUR PMI data on Monday plus another ECB Draghi speech on Tuesday to impact this pair next week. There is a bit of US data to impact here too with Tuesday’s Consumer Confidence data, Wednesday’s Crude Oil Inventories, Thursday’s Core Durable Goods and Weekly Unemployment Claims and Friday’s Advance GDP.

I’m watching for any new TC signal on this pair and the 1.10 level.

EUR/JPY: This pair continues consolidating within a daily chart triangle that is set within two other weekly chart triangles. Thus, consolidation seems to be the theme here!

Price is trading below the Cloud on the 4hr and daily chart.

The weekly candle closed as a bearish candle.

There is some EUR PMI data on Monday plus another ECB Draghi speech on Tuesday to impact this pair next week.

I’m watching for any new TC signal on this pair and the 114 and 115 levels.

AUD/USD: The Aussie made a bullish breakout from the daily chart’s triangle last week but promptly pulled back to finish the week back within this technical pattern.

This pair continues to surprise some with it resilience in the face of a stronger US$. Last week’s weaker than expected AUD Employment data may be further digested as a serious concern though and could undermine this recent bullish sentiment. However, the recovery with commodity pricing for Gold and Coal will help to support the AUD$

I note, with interest, that the Aussie pulled back to close the week just above the 61.8% fib of the swing high move and key 0.76 level. A move below this level would suggest a reversal is in progress but, for now, this is still within the bounds of a continuation move higher. Clearly, 0.76 is the level to watch next week for any makeor breakactivity.

Price action continues to be increasingly squeezed towards the apex of the triangle though and up under the major 3 ½ year bear trend line. The weekly chart also still shows a potential bullish-reversal inverse H&S brewing.

Price is now trading above the Cloud on both the 4hr and daily charts.

The weekly candle closed as a bearish coloured Doji candle reflecting the indecision that exist with this pair at the moment.

I’m watching for any new TC signal on this pair, the 0.76 region and the daily chart’s triangle trend lines.

AUD/JPY: This pair remains trading within a weekly chart triangle. The previous two weeks saw this pair range-bound between the 78 and 79 levels but last week price traded between the 79 and 80 levels.

Price is trading in the Cloud on the 4hr chart but above the Cloud on the daily chart.

The weekly candle closed as a bearish-reversal ‘Shooting Star’ candle BUT the 4hr chart has a Bull Flag look to it!

There is AUD CPI data next Wednesday to impact here.

I’m watching for any new TC signal on this pair, the 4hr chart’s trend lines and the key 79 and 80 levels.

Kiwi: NZD/USD: The NZD/USD last week chopped up through a seven-week bear trend line and the key 0.72 level couldn’t hold this breakout and closed the week back below both levels. (This bear trend line has been revised on the 4hr chart to reflect this new S/R).

The NZD/USD is trading above the 4hr Cloud but below the Cloud on the daily chart.

The weekly candle closed as a bullish-reversal ‘Inverted Hammer’ candle.

There isn’t any NZD data slated for next week but there is a bit of US data to impact here too with Tuesday’s Consumer Confidence data, Wednesday’s Crude Oil Inventories, Thursday’s Core Durable Goods and Weekly Unemployment Claims and Friday’s Advance GDP.

I’m watching for any new TC signal on this pair, the 4hr chart’s trend lines and the 0.72 and 0.70 levels.

The Yen: USD/JPY: The USD/JPY has continued to chop around either side of the 104 level but has not been able to make a decisive break away from this region, either up or down.

Recall that this pair has held up and out from a weekly chart descending channel and this breakout supports my weekly chart ‘Inverse H&S’ pattern. I had been looking for a possible pullback to test this broken channel trend line and note that any 61.8% fib pullback, normal as part of a continuation move, would bring price back to near the key 101.50 region.

Price is trading in the 4hr Cloud but just above the daily Cloud.

The weekly candle closed as a bearish coloured ‘Inside’ and ‘Spinning Top’ candle reflecting the huge amount of indecision that exist here at the moment.

I’m watching for any new TC signal on this pair, the 4hr chart’s triangle trend lines and the 104 level.

USD/CAD: The CAD$ is trading at its lowest point since March and ongoing debate about the EU-Canada deal won’t probably help it much either!

The USD/CAD traded down to the 1.30 level again last week but promptly bounced back up from this support. Friday’s CAD Retail Sales was weaker than expected and helped to lift this pair up to test the top trend line of the long term wedge pattern. This wedge has been in play for the last 24 weeks and any decisive breakout would be rather significant! For now, though, price action closed for the week STILL WITHIN this long-term wedge and I note a lack of ADX weekly momentum in this move thus far.

The upper trend line of this wedge remains the level to watch next week for any makeor breakactivity. The weekly chart shows that any sustained breakout might head to test the 1.40 region as this is near the 61.8% fib of the last swing low move. This move would be worth over 600 pips and so is well worth stalking!

Price is trading above the Cloud on the 4hr and daily chart.

The weekly candle closed as a bullish ‘Engulfing’ candle.

There isn’t any CAD data next week but there is a bit of US data to impact here with Tuesday’s Consumer Confidence data, Wednesday’s Crude Oil Inventories, Thursday’s Core Durable Goods and Weekly Unemployment Claims and Friday’s Advance GDP. Watch out for further EU- Canada deal news to impact sentiment though.

NB: USD/CAD traders need to keep an eye on Oil though as it has now broken the key $50 level and any continued hold above this level would help to support the CAD$ and might put pressure back on the USD/CAD. Just FYI: I’m stalking a bullish-reversal ‘Inverse H&S on Oil with the ‘neck-line’ at $50 and the target at $70.

I’m watching for any new TC signal and the upper wedge trend line.

EUR/AUD: The EUR/AUD chopped up and down last week but has held below monthly chart’s broken triangle pattern. A monthly candle close needs to be seen below this trend line to confirm the breakout but this is a significant bearish shift and supports the Elliott Wave’s bearish bias shown on the monthly chart.

The daily chart shows that 1.44 had been recent support below this broken trend line but price held below this key level last week. I note, on the weekly and monthly charts, that the next major horizontal support layer is down at 1.40 and this is near the 50% of the recent swing high move. This might be a decent target if bearish momentum continues and is almost 400 pips away so is well worth stalking!

Price is trading below the Cloud on the 4hr and daily chart.

The weekly candle closed as a bearish candle with long shadows.

There is AUD CPI data next Wednesday to impact here as well as some EUR PMI data on Monday plus another ECB Draghi speech on Tuesday. There is a bit of US data to impact here too from Tuesday’s Consumer Confidence data, Wednesday’s Crude Oil Inventories, Thursday’s Core Durable Goods and Weekly Unemployment Claims and Friday’s Advance GDP.

I’m watching for any new TC signal here, the 4hr chart’s triangle trend lines and the 1.44 level.

EUR/CAD: As mentioned last week, with the GBP pairs out of the picture for me for a while I have taken more interest in this pair.

The monthly chart shows a larger triangle in play but the weekly chart shows a smaller triangle as well. The monthly chart also shows that 1.50 has been a long-term S/R level and this may be a target if bullish momentum returns here, especially in light of the bullish-reversal weekly candle. However, price is becoming squeezed towards the apex of the triangle here and so price action might become more choppy before it makes any potential breakout.

The EUR/CAD is trading below the 4hr and daily Cloud.

The weekly candle was bullish-reversal ‘Hammer’ candle.

There is some EUR PMI data on Monday plus another ECB Draghi speech on Tuesday to impact this pair next week plus Wednesday’s Crude Oil Inventories.

I’m watching for any new TC signal, the 1.50 level and the triangle trend lines.

EUR/NZD: the EUR/NZD last week broke down through a recent support trend line and then moved down to test the weekly/monthly chart’s major support trend line. Price action closed the week chopping sideways above this trend line but is becoming increasingly squeezed towards the apex of the major triangle. Note the lack of momentum on the 4hr chart but also note how it looks like it could be shaping up as a Bear Flag.

The EUR/NZD is trading below the Cloud on the 4hr and daily charts.

The weekly candle closed as a large bearish candle.

There is some EUR PMI data on Monday plus another ECB Draghi speech on Tuesday to impact this pair next week.

I’m watching for any new TC signal on this pair and the triangle support trend line.

EUR/GBP: I’m giving the GBP pairs a bit of a wide berth at the moment but the weekly chart pattern on the EUR/GBP stood out for me this week.

This pair rallied following the GBP flash crash but it stalled at the whole-number 0.90 region which is also previous S/R. The EUR/GBP has now printed two consecutive bearish weekly candles but the pattern of the last three weekly candle is of more interest as they have formed up with a bit of a bearish-reversal ‘Evening Star’ appearance:

Price also closed below the 0.89 S/R level and so this may be the level to watch next week for any makeor breakactivity.

Bearish target: The weekly chart shows that a 61.8% fib pullback of this swing high move would bring price down to near the 0.80 level which is also near the weekly 200 EMA and previously broken trend line for added confluence. This might be an eventual target if bearish momentum develops and is a move of around 900 pips so well worth stalking!

Bullish target: the monthly chart shows that a 100% retracement of the longer-term swing low move is up near the 0.98 level. This might be an eventual target if bullish momentum continues and this is also around 900 pips away so worth stalking too!

The EUR/GBP is trading below the Cloud on the 4hr chart but above the Cloud on the daily chart.

The weekly candle closed as a large bearish candle.

I’m watching for any new TC signal here and the 0.89 level.

Silver: Silver is holding just above a triangle support trend line that has been in force for the last 10 months and this is the level to watch for any makeor breakactivity, especially with this recent US$ strength.

Silver is trading in the 4hr Cloud but below the daily Cloud yet it remains above the weekly Cloud.

It is worth noting that the Silver Miners ETF, SIL, has printed a bullish-reversal ‘Morning Star’-style pattern like the Gold Miners ETF, GDX:

The weekly candle closed as a bullish coloured ‘Spinning Top’ candle.

I’m watching for any new TC signal and the daily chart’s triangle support trend line.

Gold: Gold last week broke up and out from the 10-day trading channel bound by the $1,250 and $1,265 levels. Price pulled back below $1,265 briefly on Friday but ended up closing the week just above this S/R level.

It is of some note that Gold had a bullish week considering the gains made with the US$.

Any hold above $1,265 would bring $1,300 and then $1,380 into focus.

Any break below $1,250 would bring the 61.8% fib of the swing high move into focus and this is near the $1,150 region.

Gold is trading above the Cloud on the 4hr chart but below the Cloud on the daily chart.